Purushottam Madanlal Boob, Pune V. Deputy Commissioner of Income-tax,

ITA 629/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1795 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Capital asset; Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 629 /PN/201 4 / ASSESSMENT YEAR : 20 0 9 - 1 0 PURUSHOTTAM MADANLAL BOOB, C/O MAHESH INDUSTRIES INDUSTRIAL ESTATES, SHRIRAMPUR 413709 . / APPELLANT PAN: A BUPB8208J VS. THE DY . COMMISSIONER OF INCOME TAX , AHMEDNAGAR CIRCLE , AHMEDNAGAR . / RESPONDENT / APPELLANT BY : SHRI C.H. NANIWADEKAR / RESPONDENT BY : SHRI S.K. RASTOGI, CIT / / / DATE OF HEARING : 0 4 . 0 5 .201 6 / DATE OF PRONOUNCEMENT: 20 . 0 5 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I T/TP , PUNE , DATED 3 0 . 0 1 .20 14 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF TH E INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) IT/TP HAS ERRED IN CONFIRMING THE ORDER PASSED B Y THE DEPUTY COMMISSIONER OF INCOME TAX AHMEDNAGAR TREATING THE LONG TERM CAPITAL GAINS ARISED ON SALE OF PLOT AS BUSINESS INCOME. THAT THE LONG TERM CAPITAL GAINS SHOWN ON SALE OF PLOT BE TREATED AS THE LONG TERM CAPITAL GAINS AND NOT AS A BUSINESS INCOM E. ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 2 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO TREATMENT OF GAINS ARISING ON SALE OF PLOT. THE CASE OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE SAME IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAINS , WHEREAS THE SAME HAS BEEN ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF ASSESSEE. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. THE ASSESSEE HAD PURCHASED NA PROPERTY MEASURING 5834 SQ.MTRS., LOCATED AT TPS N O.4, S R .NO.45/1H1/CTS 2142, FINAL PLOT NO.81/1 , AT SHRIRAMPUR IN AUGUST, 2000. THEREAFTER, HE APPLIED FOR SUB - DIVISION OF PLOTS WHICH WERE SUB - DIVIDED IN 2001. OUT OF WHICH, SIX PLOTS WERE CONVERTED INTO STOCK IN TRADE FOR CONSTRUCTION OF OWNERSHIP FLATS AND THE BALANCE PLOTS WERE KEPT AS SUCH. THE CAPITAL GAINS ARISING ON CONVERSION OF PLOTS INTO STOCK IN TRADE HAS BEEN PAID BY THE ASSESSEE IN THE RESPECTIVE YEARS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD ONE OF THE PLOTS WHICH HE CLAIMS TO HAVE HELD AS INVESTMENT AND WORKED OUT THE INCOME FROM LONG TERM CAPITAL GAINS BY INDEXING THE COST OF PLOT. THE CLAIM OF ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT IT HAD ONLY ONE INVESTMENT IN IMMOVABLE PROPERTY WHICH WAS PURCHASED WITH AN INTENT ION OF INVESTMENT. HOWEVER, SINCE THE LAND WAS SITUATED WITHIN MUNICIPAL LIMITS, THE ASSESSEE DECIDED TO START NEW ACTIVITY AS BUILDER AND OUT OF 12 PLOTS PLOTTED IN THE PLOT OWNED BY THE ASSESSEE, THREE PLOTS WERE CONVERTED INTO STOCK IN TRADE IN ASSESSM ENT YEAR 2005 - 06 AND THREE OTHER PLOTS WERE CONVERTED INTO STOCK IN TRADE IN ASSESSMENT YEAR 2008 - 09 . THE INVESTMENT IN NA LAND PURCHASED BY THE ASSESSEE WAS CLAIMED TO BE AN INVESTMENT AND THERE WERE NO EXPENSES INCURRED ON THE SAID PLOT, EXCEPT FOR DEVE LOPMENT AND NA CHARGES FOR REVISED PLAN OF RS.3,595/ - WERE PAID BY THE ASSESSEE. THE ASSESSING OFFICER ON THE OTHER HAND HAD NOTED THAT THE ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 3 ASSESSEE HAD PURCHASED AN AGRICULTURAL LAND AND CONVERTED INTO NON - AGRICULTURAL PROPERTY BY RESORTING TO VERY COMPL ICATED, COSTLY AND TIME CONSUMING PROCESS IN THE REVENUE AUTHORITIES OFFICES. FURTHER, AS PER THE ASSESSING OFFICER, WHERE THE ASSESSEE HAD DIVIDED NA PROPERTY INTO VARIOUS SUB PLOTS FOR SALE AND ALSO BUILT COMMERCIAL AND RESIDENTIAL UNITS ON THE PROPERT Y AND WHERE THE ASSESSEE HAD DISPOSED OF THE SUB PLOTS TO VARIOUS PARTIES FOR ERECTION OF BUNGALOWS OVER A PERIOD OF TIME, THE INTENTION OF ASSESSEE AT THE TIME OF PURCHASE OF PROPERTY WAS TO EARN PROFITS BY WAY OF SUB PLOTTING AND ERECTION OF BUI LDINGS FO R RESIDENTIAL AND COMMERCIAL PURPOSES. THE ASSESSING OFFICER ALSO CONSIDERED THAT THE ASSESSEE HAD PROVIDED AREAS FOR INTERNAL ROADS FOR THE ENTIRE PLOT HOLDERS AS WELL AS CONSTRUCTED BUILDINGS THEREON. WHERE THE ASSESSEE HAD SOLD PLOTS AS WELL AS RESIDE NTIAL AND COMMERCIAL UNITS IN THE EARLIER YEARS RIGHT FROM ASSESSMENT YEAR 2005 - 06, IT WAS A REPETITIVE AFFAIR AND DEFINITELY FELL WITHIN THE HEAD OF INCOME I.E. INCOME FROM BUSINESS. THE ASSESSING OFFICER STRESSED THAT THE INTENTION OF ASSESSEE FROM BUSINESS. THE ASSESSING OFFICER STRESSED THAT THE INTENTION OF ASSESSEE RIGHT FRO M THE DATE OF PURCHASE OF SAID PROPERTY WAS TO EARN PROFIT BY CONVERTING IT INTO NA AND THEN PLOTTING IT AND SELLING SUBSEQUENTLY TO VARIOUS PURCHASERS AT VERY HIGH PRICES BEING NA PROPERTIES. ANOTHER POINT NOTED BY THE ASSESSING OFFICER WAS THAT THE CONV ERSION INTO NA WAS VIDE COLLECTORS ORDER DATED 11.06.2001 I.E. AFTER PURCHASE OF THE SAID PLOT ON 30.08.2000. THE ASSESSING OFFICER THUS, COMPUTED THE INCOME FROM BUSINESS AT RS.26,31,299/ - . 5. BEFORE THE CIT(A), THE ASSESSEE STRESSED THAT IN ASSESSMENT YEARS 2005 - 06 AND 2008 - 09, THREE PLOTS EACH WERE CONVERTED INTO STOCK IN TRADE AND THE CAPITAL GAINS ARISING ON CONVERSION OF SIX PLOTS INTO STOCK IN TRADE WERE DISCLOSED AS LONG TERM CAPITAL GAINS WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HE FUR THER STATED THAT HE WAS NOT CONTINUOUSLY CARRYING ON THE ACTIVITY ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 4 OF PURCHASING AGRICULTURAL LAND AND CONVERTING THE SAME INTO NA LAND AND THEREAFTER, DEVELOPING AND SELLING THE SAID PLOTS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE THE CIT(A) STRESSED THAT THE ASSESSING OFFICER WAS WRONG IN OBSERVING THAT THE ASSESSEE HAD PURCHASED AGRICULTURAL LAND W HICH WAS CONVERTED INTO NA LAND, IN FACT THE ASSESSEE HAD PURCHASED NA LAND AND IN SUPPORT THE CTS EXTRACTS WERE PRODUCED. FURTHER, THE A SSESSEE POINTED OUT THAT THERE WAS BIG TIME GAP BETWEEN INVESTMENT IN LAND AND SALE OF PLOTS, WHERE THE INVESTMENT IN PLOT WAS MADE IN FINANCIAL YEAR 2000 - 01, WHEREAS THE CONVERSION OF SOME OF THE PLOTS AND CONSTRUCTION WAS IN ASSESSMENT YEARS 2005 - 06 AND 2008 - 09 AND SALE OF ONE OF THE PLOTS IN ASSESSMENT YEAR 2009 - 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT FROM THE ABOVE FACTS, INTENTION OF THE ASSESSEE WAS CLEAR TO HOLD THE SAID PLOT AS INVESTMENT AND NOT AS BUSINESS OR IN T HE ADVENTURE IN THE NATURE OF TRADE. THE CIT(A) REJECTED THE CLAIM OF ASSESSEE AND WAS OF THE VIEW THAT THE SALE OF PLOT AMOUNTED TO ADVENTURE IN THE NATURE OF AND WAS OF THE VIEW THAT THE SALE OF PLOT AMOUNTED TO ADVENTURE IN THE NATURE OF TRADE. IN THIS REG ARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN P M MOHAMMED MEERKHAN VS. CIT (1969) 73 ITR 753 (SC). APPLYING THE TEST LAID DOWN BY THE HONBLE SUPREME COURT, THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEES CASE WAS ADVENTURE IN THE NATURE OF TRADE BECAUSE HE HAD SOLD THE PLOTS OF LAND AFTER SUB DIV IDING INTO AND PROVIDING INTERNAL ROADS AND CONSTRUCTING RESIDENTIAL AND COMMERCIAL PROPERTIES IN THE NEIGHBOURHOOD. THE CIT(A) WAS OF THE VIEW THAT ANY DEVELOPMENT OF INFRASTRUCTURE AND CONSTRUCTION OF RESIDENTIAL AND COMMERCIAL PROPERTIES NEARBY WAS BOU ND TO INCREASE THE PRICE OF PLOTS OF LAND AND ALSO IT WOULD ENSURE QUICKER SALE OF PLOTS FOR MORE PROFITS. HENCE, THE CIT(A) HELD THAT THE INCOME IS TO BE ASSESSED IN THE HANDS OF ASSESSEE AS INCOME FROM ADVENTURE IN TRADE AND THE CLAIM OF ASSESSEE TO APP LY THE RULE OF CONSISTENCY WAS REJECTED BY THE CIT(A). ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 5 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US THROUGH THE FACTS OF THE CASE POINTED OUT THAT THE ASSESSEE HAD PUR CHASED THE SAID LAND WITHIN MUNICIPAL LIMITS AND BECAUSE OF THE LAND BEING OF LARGE AREA I.E. 5300 SQ.MTRS. IN APRIL, 2001, IT HAD SUB DIVIDED THE SAME INTO SUB PLOTS. THEREAFTER, HE DECIDED TO CONSTRUCT HOUSING SCHEME OF OWNERSHIP FLATS AND THE PROFITS F ROM THE SAME WERE DECLARED IN ASSESSMENT YEAR 2005 - 06, WHERE THE ASSESSEE ALSO DECLARED SHORT TERM CAPITAL GAINS ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE. THE ASSESSMENT FOR THAT YEAR WAS COMPETED UNDER SECTION 143(1) OF THE ACT. IN ASSESSMENT YEAR 2008 - 09 ON THREE OTHER PLOTS, OWNERSHIP FLATS WERE CONSTRUCTED AND THE ASSESSEE OFFERED LONG TERM CAPITAL GAINS ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE, WHICH WAS ALSO ASSESSED UNDER SECTION 143(1) OF THE ACT. IN THE YEAR UNDER APPEAL, THE ASSESSEE HAD SOLD TWO SECTION 143(1) OF THE ACT. IN THE YEAR UNDER APPEAL, THE ASSESSEE HAD SOLD TWO PLOTS I.E. PLOT NO.1 AND 2 FOR CONSIDERATION OF RS.31 LAKHS AND THE INCOME ARISING THEREFROM WAS OFFERED AS INCOME FROM LONG TERM CAPITAL GAINS . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT IN THE EARLIER YEA RS THE REVENUE DEPARTMENT HAD ACCEPTED THE CONVERSION OF HIS INVESTMENT INTO STOCK IN TRADE ON WHICH HE HAD OFFERED TAX WHICH WAS ACCEPTED BY THE DEPARTMENT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE OWNED ONE PI ECE OF LAND AND WAS STILL HOLDING THE BALANCE LAND. HE FURTHER STRESSED THAT WHERE THE DEPARTMENT HAD ALREADY ACCEPTED HIS MODE OF TRANSACTION THAT THE ASSE T WAS CAPITAL ASSET, THEN IN DECIDING THE SECOND MODE, THE SAID ASSET ITSELF COULD NOT BE TREATED A S BUSINESS ASSET AND IT WAS TREATED TO BE A CAPITAL ASSET . HE FURTHER STRESSED THAT UNLESS THERE WAS CHANGE OF FACTS, THE PRINCIPLES OF RES JUDICATA ARE APPLICABLE. ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 6 IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COUR T IN CIT V S. GOPAL PUROHIT (2011) 336 ITR 287 (BOM). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THERE WAS NO CHANGE IN FACTS AND ONLY MODE WAS CHANGED. HE FURTHER BROUGHT TO OUR NOTICE THAT EVEN AFTER 14 YEARS, THE AS SESSEE WAS HOLDING BALANCE LAND. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE DREW OUR ATTENTION TO THE ORDER OF CONVERSION TO NA PLOT DATED 11.06.2001, WHICH IS PLACED AT PAGE 8 OF THE PAPER BOOK. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ASSESSEE APPLIED FOR CONVERSION AND THEREAFTER PREPARED LAYOUT AND CONVERTED THE BIGGER PLOT INTO SUB PLOTS AND CONSTRUCTED FLATS ON SOME OF PLOTS AND SOLD THEM. THE EARLIER YEARS ASSESSMENT W ERE COMPLETED UNDER SECTI ON 143(1) OF THE ACT AND DURING THE YEAR UNDER CONSIDERATION, THERE WAS SCRUTINY ASSESSMENT. RELYING ON THE RATIO LAID DOWN BY THE AUTHORITIES BELOW, THE LEARNED DEPARTMENTAL REPRESENTATIVE LAID DOWN BY THE AUTHORITIES BELOW, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE FACTS IN CIT V S. GOPAL PUROH IT (SUPRA) WERE DIFFERENT AND THE RATIO COULD NOT BE APPLIED. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRESSED THAT THE BASIC QUESTION TO BE SEEN IS THE INTENTION OF ASSESSEE AT THE TIME OF PURCHASE, WHERE THE LAND WAS PURCHASED IN AUGUST, 2000 AND WITHIN 8 MONTHS, THE SAME WAS DIVIDED INTO SMALLER PLOTS AND AS PER THE LAYOUT, EVEN ROADS WERE MADE, SO THE INTENTION WA S CLEAR FROM THE TRANSACTION ITSELF. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REJOINDER STRESSED THAT TH E ORDER PLACED AT PAGE 8 OF PAPER BOOK IS FOR THE SUB DIVISION OF PLOTS AND FOR WHICH ALSO, NA PERMISSION WAS REQUIRED AND THE ASSESSEE PAID ONLY SUM OF RS.3,595/ - . I N CASE THE PLOT IS CONVERTED FROM AGRICULTURAL TO NA, ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 7 THEN MUCH HIGHER CHARGES ARE TO BE PAID. OUR ATTENTION WAS DRAWN TO THE PROPERTY CARD EXTRACT DATED 30.08.2000, WHEREIN THE LAND WAS SHOWN TO BE RESIDENTIAL NON - AGRICULTURAL AS PER THE DOCUMENT DATED 05.09.2001. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER STRESSED THAT WHEN THE ASSESSMENT IN THE HANDS OF ASSESSEE WAS BEING COMPLETED IN THE MONTH OF DECEMBER, 2011, STILL NO ACTION WAS TAKEN AGAINST THE EARLIER ASSESSMENT YEARS, WHERE THE INCOME HAS BEEN ASSESSED IN THE HANDS OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE INTENTION HAD TO BE LOOKED AT THE TIME OF PURCHASE AND THE INTENTION TO CONVERT INTO PLOTS WAS DIFFERENT, WHEREIN THE PLOTS WERE SUB DIVIDED, BUT THE INVESTMENT IS BEING HELD TILL DATE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF TWO PLOTS I.E. PLOT NOS.1 AND 2 WHICH WAS PART OF BIGGER CAPITAL GAINS ON SALE OF TWO PLOTS I.E. PLOT NOS.1 AND 2 WHICH WAS PART OF BIGGER PLOT OWNED BY THE ASSESSEE AT SHRIRAMPUR. THE ASSESSEE CLAIMS TO HAVE PURCHASED NA PROPERTY I.E. PLOT ADMEASURING 5362 SQ.MTRS. IN 2001. SINCE THE PLOT OF LAND PURCHASED BY THE ASSESSEE WAS BIG, IT WAS SUB - DIVIDED INTO 12 SUITABLE PLOTS. ADMITTEDLY, THE ASSESSEE PROVIDED F OR ROAD WITHIN THE SAID EA RMARKING OF PLOTS. OUT OF 12 PLOTS ON THE SAID PIECE OF LAND, THE ASSESSEE HAD UTILIZED SIX PLOTS FOR CONSTRUCTION ACTIVITY. THE CONSTRUCTION ON PLOT NOS.7, 8 AND 12 WAS COMPLETED IN ASSESSMENT YEAR 2005 - 06 AND THE INCOME ARISING THEREFROM WAS OFFERED AS SHORT TERM CAPITAL GAINS I.E. THE ASSESSEE DECLARED INCOME FROM CONVERSION OF INVESTMENT HELD BY IT INTO STOCK IN TRADE AND OFFERED THE SAME TO TAX , IN ADDITION TO PROFITS ON SALE OF FLATS . FURTHER, PLOT NOS.9, 10 AND 11 WERE ALSO UTILIZED BY THE ASSESSE E FOR CONSTRUCTION ACTIVITY AND IN ASSESSMENT YEAR 2008 - 09, IT OFFERED INCOME FROM LONG TERM CAPITAL GAINS ON ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 8 CONVERSION OF INVESTMENT HELD BY IT INTO STOCK IN TRADE ALONG WITH PROFITS @ 8% ON SALE OF FLATS . THE ASSESSEE TIME AND AGAIN HAS STRESSED BEFORE THE AUTHORITIES BELOW THAT IT HAD ONLY MADE ONE INVESTMENT IN IMMOVABLE PROPERTY WHICH IS BEING HELD BY IT FROM THE YEAR 200 0 AND EVEN TILL DATE, SOME OF THE PLOTS ARE HELD BY THE ASSESSEE. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD TWO PLOTS AND THE INCOME ARISING THEREFROM WAS OFFERED AS INCOME FROM LONG TERM CAPITAL GAINS . THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF ASSESSEE AND WAS OF THE VIEW THAT THE INCOME IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE FIRST OBJECTION OF THE AS SESSING OFFICER WAS THAT THE ASSESSEE HAD PURCHASED THE LAND AS AGRICULTURAL LAND AND CONVERTED INTO NA PROPERTY BY RESORTING TO VERY COMPLICATED, COSTLY AND TIME CONSUMING PROCESS IN THE REVENUE AUTHORITIES OFFICE. FURTHER , THE VIEW OF THE ASSESSING OFF ICER WAS THAT THE ASSESSEE SINCE HAD DIVIDED NA PROPERTY INTO VARIOUS SUB PLOTS FOR SALE AND HAD ALSO BUILT COMMERCIAL AND RESIDENTIAL UNITS ON THE PROPERTY AND ALSO PROVIDED AREAS FOR INTERNAL ROADS FOR THE ENTIRE PLOT HOLDERS AS WELL AS BUILDING PROVIDED AREAS FOR INTERNAL ROADS FOR THE ENTIRE PLOT HOLDERS AS WELL AS BUILDING ERECTED THEREON, THEN THE ACTIVITY CARRIED ON BY THE ASSESSEE DEFINITELY FALLS UNDER THE HEAD BUSINESS INCOME AND WAS SO ASSESSED BY THE ASSESSING OFFICER. THE CIT(A) ON THE OTHER HAND, HELD THE ASSESSEE TO BE ENGAGED IN ADVENTURE IN THE NATURE OF TRADE. 11. THE FIRST BONE OF CONTENTION BETWEEN THE ASSESSEE AND REVENUE IS THE NATURE OF LAND PURCHASED BY THE ASSESSEE. THE ASSESSEE HAS TIME AND AGAIN POINTED OUT BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US THAT THE LAND PURCHASED BY IT WAS NOT AN AGRICULTUR AL LAND, BUT NON - AGRICULTURAL LAND. THE ASSESSEE HAS ATTACHED THE EXTRACT OF PROPERTY CARD WHICH IS PLACED AT PAGE 7 OF THE PAPER BOOK, UNDER WHICH THE SAID LAND HOLDING IS DECLARED TO BE RESIDENTIAL NON - AGRICULTURAL. FURTHER, THE ASSESSEE POINTED OUT TH AT THE NA ORDER REFERRED ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 9 TO BY THE AUTHORITIES BELOW WAS IN RESPECT OF SUB - DIVISION OF PLOT AND WHICH WAS NOT COMPLICATED OR COSTLY NOR ANY TIME CONSUMING AFFAIR. IT WAS APPLIED FOR NA ORDER ON 25.10.2000 AND WAS ISSUED TO THE ASSESSEE ON 20.04.2001 AND T HE FEES PAID BY THE ASSESSEE FOR OBTAINING THE SAID NA ORDER WAS ONLY RS.3,595/ - . THE COPY OF NA ORDER ALONG WITH BIFURCATED LAYOUT PLAN ARE PLACED AT PAGES 8 AND 9 OF THE PAPER BOOK. THE PERUSAL OF LAYOUT PLAN REFLECTS THAT THE ASSESSEE HAD DIVIDED THE PLOT INTO TWO WHILE PROVIDING ROAD IN BETWEEN , SINCE THE PLOT OWNED BY THE ASSESSEE WAS THREE SIDE OPEN AND MUNICIPAL ROADS WERE ALREADY AVAILABLE ON EACH SIDE OF THE LAND. ON PLOT NOS.7, 8 AND 12, THE ASSESSEE HAS DEVELOPED THE FLATS ON OWNERSHIP BASIS. FURTHER, ON PLOT NOS.9, 10 AND 11, THE ASSESSEE ALSO DEVELOPED FLATS AND OFFERED THE SAME ON OWNERSHIP BASIS. THE ASSESSEE FOR BOTH THESE TRANSACTIONS HAD OFFERED THE INCOME FIRST ON CONVERSION OF INVESTMENT INTO STOCK IN TRADE AND THERE ON, THE PROFITS F ROM VENTURE UNDERTAKEN BY IT. ALL THESE PLOTS I.E. 7 TO 12 WE RE ON ONE SIDE OF DIVIDING ROAD AND ON THE OTHER SIDE OF THE PLOT NUMBERED 1 TO 6 AND FOR THE YEAR UNDER AND ON THE OTHER SIDE OF THE PLOT NUMBERED 1 TO 6 AND FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD ONLY PLOT NOS.1 AND 2. IT MAY BE POINTED OUT HEREIN THAT THE ASSESSEE TILL DATE IS HOLDING CERTAIN PLOTS AS THE SAME HAVE NOT BEEN SOLD BY THE ASSESSEE. 1 2 . NOW, LET US CONSIDER THE REASONS FOR REJECTING THE CLAIM OF ASSESSEE BY THE AUTHORITIES BELOW. THE FIRST OBJECTION WAS THAT WHERE THE ASSESSEE HAD PURCHASED AN AGRICULTURAL LAND AND HAD CONVERTED INTO NA PROPERTY BY RESORTING TO VERY COMPLICATED, COSTLY AND TIME CONSUMING PROCESS, THE SAME WAS FOR CARRYING ON THE BUSINESS ACTIVITY AND AS PER THE CIT(A), IT WAS ADVENTURE IN THE NATURE OF TRADE. THIS CONTENTION OF THE AUTHORITIES BELOW IS NOT CORRECT AS THE EXTRACT OF PROPERTY CARD ITSELF WHICH IS DATED 05.09.2001 , COPY OF WHICH REFLECTS THE LAND TO BE RESIDENTIAL NON - AGRICULTURAL. THE ASSESSEE HAD PURCHASED THE ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 10 SAID PROPERTY VIDE PURCHASE DEED DATED 30.08.2000 , COPY OF WHICH IS PLACED AT PAGES 10 TO 22 OF THE PAPER BOOK AND ON THE DATE OF PURCHASE, THE NATURE OF LAND WAS RESIDENTIAL NON - AGRICULTURAL . THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE AGRICULTURAL LAND PUR CHASED BY THE ASSESSEE HAS BEEN CONVERTED INTO ANY LAND FOR WHICH, THE ASSESSEE HAD PAID EXORBITANT FEES. ADMITTEDLY, WHERE THE AGRICULTURAL LAND IS CONVERTED INTO NA LAND, THE CONVERSION FEE IS HIGH. HOWEVER, THE ASSESSEE CATEGORICALLY STATES AND RELIES ON THE EVIDENCE PRODUCED BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US THAT THE LAND PURCHASED BY IT WAS NA LAND ON THE DATE ON WHICH THE ASSESSEE PURCHASED. 1 3 . NOW, COMING TO THE NEXT EVIDENCE FILED BY THE ASSESSEE BY WAY OF NA ORDER, WHICH IS PLAC ED AT PAGE 8 OF THE PAPER BOOK, UNDER WHICH SUM OF RS.3,595/ - WAS PAID BY THE ASSESSEE IN ORDER TO SUB DIVIDE THE PLOT. THE DATE OF APPLICATION FOR SUB DIVISION OF NA PROPERTY IS 25.10.2000 AND THE DATE OF OF APPLICATION FOR SUB DIVISION OF NA PROPERTY IS 25.10.2000 AND THE DATE OF ORDER IS 20.01.2001. THE ASSESSEE HAD PURCHASED THE SAID PROPERTY ON 30.08.2000 AND ON 25.10.2000 APPLIED FOR SUB DIVISION OF PLOTS. AS POINTED OUT EARLIER, THE PLOT OF LAND PURCHASED BY THE ASSESSEE WAS ADMEASURING 5362 SQ.MTRS. AND WAS THREE SIDE OPEN PLOT. THE LAYOUT PLAN AT PAGE 9 OF THE PAPER BOO K REFLECTS THAT THE FACING OF PLOT IS ON THREE DIFFERENT ROADS AND ONLY IN THE CENTRE OF THE PLOT, THE ASSESSEE PROVIDED THE WAY BY DIVIDING ROAD. IN SUCH CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE ASSESSEE HAD GOT INVOLVED IN COMPLICATED PROCESS OF SUB DIVISION OF PLOT. ON ONE SIDE OF THE SUB DIVIDED PLOT, THE ASSESSEE CARRIED OUT THE COMMERCIAL ACTIVITY OF BUILDING TWO PROJECTS AND ON THE OTHER SIDE, THOUGH THERE WAS SUB DIVISION OF PLOTS, BUT AS AGAINST THE PROPERTY PURCHASED IN 2001 , THE FIRST SALE OF PLOTS WAS MADE IN FINANCIAL YEAR 2008 - 09 AND SOME OF THE PLOTS ARE BEING HELD BY THE ASSESSEE TILL DATE. ONE ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 11 ASPECT TO BE CONSIDERED HEREIN IS THAT IN CASE A PERSON IS INVOLVED IN BUSINESS ACTIVITY OR IN ADVENTURE IN THE NATURE OF TRADE, THE ENDEAVOUR WOULD BE TO SELL THE PROPERTY AT ITS EARLIEST IN ORDER TO GENERATE PROFITS WHICH COULD BE RE - USED FOR BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE, IF ANY. HOWEVER, THE ASSESSEE HAD ONLY ONE PROPERTY WHICH WAS PURCHASED WAY BACK 2000 AND TWO OF THE SAID S UB DIVIDED PLOTS ARE BEING SOLD IN THE YEAR UNDER CONSIDERATION AND THE BALANCE PLOTS ARE BEING HELD BY THE ASSESSEE AS ON 31.03.2009 . I N SUCH CIRCUMSTANCES , CAN IT BE HELD THAT THE ASSESSEE WAS INVOLVED INTO BUSINESS ACTIVITY OR A DVENTURE IN THE NATURE O F TRADE ? IT MAY FURTHER BE POINTED OUT THAT THE ASSESSEE HAD SOLD OWNERSHIP FLATS ON THE TWO PROJECTS DEVELOPED BY IT AND THE PROFIT ON SALE OF PLOTS SHOWN IN THE EARLIER YEARS WAS ON ACCOUNT OF CONVERSION OF INVESTMENT INTO STOCK IN TRADE AND ALSO PROFIT ON SALE OF OWNERSHIP FLATS BY ADOPTING 8% TO 10% OF GP TO WORK - IN - PROGRESS , SINCE THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD FOR THE SAID SCHEMES. WHERE THERE IS LONG TIME GAP BETWEEN THE INVESTMENT MADE BY THE ASSESSEE IN PURCHASE OF LAND TIME GAP BETWEEN THE INVESTMENT MADE BY THE ASSESSEE IN PURCHASE OF LAND AND IN SUB PLOTTING AND THEREAFTER, SALE OF PLOTS, THEN THE INTENTION OF THE ASSESSEE IS TO BE CONSIDERED IN TOTALITY. THE ASSESSEE CLAIMS THAT ON THE DATE OF PURCHASE, HIS INTENTION WAS TO INVEST IN THE SAID LAND. 1 4 . ANOTHER ASPECT TO BE KEPT IN MIND IS THAT THE ASSESSEE IN THE EARLIER YEARS CLAIMS TO HAVE CONVERTED ITS INVESTMENT INTO STOCK IN TRADE AND HAD WORKED OUT THE INCOME FROM SHORT TERM CAPITAL GAINS / LONG TERM CAPITAL GAINS RESPECTIVELY, WHICH WAS ACCEPTED BY THE AUTHORITIES BELOW , UNDOUBTEDLY, BY INTIMATION PASSED UNDER SECTION 143(1) OF THE ACT. HOWEVER, THE TRANSACTION OF INVESTMENT IN THE SAID PLOT OF LAND HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE HANDS OF ASSESSEE EVEN AFTER SCRUTINY PROCEEDINGS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT IN THE HANDS OF ASSESSEE RELATING TO ASSESSMENT YEAR ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 12 2009 - 10 . N O ACTION WAS TAKEN AGAINST THE INCOME OFFERED BY THE ASSESSEE IN EARLIER YEARS THOUGH THE TIME LIMIT PROVIDED UNDER THE ACT ALLOWED THE REVENUE AUTHORITIES TO TAKE CONSEQUENT STEPS FOR RE - ASSESSING THE INCOME IN THE HANDS OF ASSESSEE IN ASSESSMENT YEAR S 2005 - 06 AND 2008 - 09 . IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE ADMITTEDLY, THE ASSESSEE HAD PURCHASED NA PLOT AND HAD ONLY BIFURCATED THE TWO SETS OF PLOTS BY SUB DIV IDING THE BIGGER PLOT AND DEMARCATING THE LINE BETWEEN TWO SETS OF LAND AND THE NA ORDER WAS OBTAINED BY THE ASSESSEE FOR SUB DIVISION OF PLOTS AND NOT FOR CONVERSION FROM AGRICULTURAL LAND TO NA AGRICULTURAL LAND, WE HOLD THAT THE INCOME ARISING TO THE AS SESSEE IS TO BE ASSESSED AS INCOME FROM CAPITAL GAINS IN THE HANDS OF ASSESSEE. THOUGH THE RULE OF CONSISTENCY DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS, BUT WHERE THE FACTS OF THE CASE REMAIN UNCHANGED, THEN A CONSISTENT APPROACH SHOULD BE APPLIED IN ASSESSING THE INCOME IN THE HANDS OF ASSESSEE. THE ASSESSEE IN THE EARLIER YEARS I.E. 2005 - 06 AND 2006 - 07 HAD DECLARED THAT IT WAS HOLDING PIECE OF LAND AS INVESTMENT AND HAD 07 HAD DECLARED THAT IT WAS HOLDING PIECE OF LAND AS INVESTMENT AND HAD COMPUTED THE INCOME FROM CAPITAL GAINS ON CONVERSION OF INVESTMENT INTO STOCK IN TRADE AND HAD FURTHER OFFERED BUSINESS PROFITS ON SALE OF FLATS AND THE SAME HAVING BEEN ACCEPTED AND ADOPTED IN THE HANDS OF ASSESSEE, JUSTIFIES THE CLAIM OF ASSESSEE THAT THE LAND HELD BY IT WAS FOR INVESTMENT AND ITS SALE THEREAFTER, RESULTS IN INCOME FROM CAPITAL GAINS. THE INTENTION AT THE TIME OF PURCHASE OF LAND WAS FOR THE PURPOSE OF INVESTMENT AND MERELY BECAUSE THE BIGGER PLOT WAS SUB DIVIDED INTO SMALLER PLOTS DOES NOT ESTABLISH THAT THE ASSESSEE S INTENTION WAS TO CARRY ON THE BUSINESS ACTIVIT Y. IN THIS REGARD, OTHER CIRCUMSTANCES OF THE CASE HAVE TO BE KEPT IN MIND I.E. AS AGAINST THE INVESTMENT IN AUGUST, 2000, AS AGAINST PART DEVELOPMENT OF PROJECTS, THE ASSESSEE HAD SOLD TWO PLOTS OF LAND DURING THE YEAR AND OTHER YEARS, THE BALANCE PLOTS OF LAND ARE STILL AVAILABLE WITH THE ASSESSEE. MERELY BECAUSE THE ASSESSEE HAD DIVIDED BIGGER PLOT INTO SMALL ITA NO. 629 /PN/20 1 4 PURUSHOTTAM MADANLAL BOOB 13 PLOTS DOES NOT ESTABLISH THE SAME TO BE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE OR ADVENTURE IN THE NATURE OF TRADE , KEEPING IN VIEW THE OTH ER CIRCUMSTANCES OF THE CASE . ACCORDINGLY, WE FIND NO MERIT IN THE ORDER OF CIT(A) IN THIS REGARD AND REVERSING THE SAME, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF MAY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 20 TH MAY , 201 6 . GCVSR GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELL ANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I T/TP , PUNE ; 4. / THE CIT - I , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE